Capex improves across sectors; investment in manufacturing jumps 210%
While the increase was aided by mega project announcements, especially in the steel sector, traditional sectors like petrochemicals, cement, automobiles and new age sectors like electronics, e-vehicles, data centres also made a significant contribution.
The India private capital expenditure (capex) cycle wheel is turning at a high speed. A report by Goldman Sachs highlights that fresh investment announcements in the last fiscal jumped 145 to 150 percent compared to the FY21 -- a year ravaged by the COVID pandemic. The manufacturing sector was the clear outlier with a 210 percent growth when it came to new investment announcements.
While the increase was aided by mega project announcements, especially in the steel sector, traditional sectors like petrochemicals, cement, automobiles and new age sectors like electronics, e-vehicles, data centres also made a significant contribution. That's not all, the number of projects announced last fiscal was 80 percent higher than in FY21.
Overall, the capex vehicle has improved, said B Thiagarajan, MD, Blue Star. He said the company is now investing what it should have done years ago. Blue Star is investing close to Rs 400 crore this fiscal, Thiagarajan said.
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He observed that multiple industrial sectors were seeing a lot of capital investment and added that the company's growth story is solid; they haven't seen such demand in the past decade.
“In the B2C space, we have increased the prices thrice last year – in April, July and October and yet the market demand stood up. Now again in April we have increased and still the demand is good. So there is lot of optimism in the market place," he said.
“Our annual capex would have been around Rs 150 crore and what we are foreseeing is that in about three years’ time, we may have to invest more. It is the demand that is growing and in order to fulfill the demand you have to expand the capacity,” he added.
Meanwhile, Ashish Bhandari, MD & CEO, Thermax, said demand was strong across multiple sectors, resulting in growth.
“We are seeing strength across multiple sectors, demand is strong but that said the commodity price increase is a dampener and this particular effect has the potential to bring the entire growth story down in coming quarters. So right now things are very good but there are dark clouds on the horizon," he said.
Bhandari said food, pharmaceuticals and chemicials picked up initially, but that steel, refining and petrochemicals saw better growth prospects last year.
“When we came out of COVID our capacity utilization was at 60-70 percent, we have now crossed the 90 percent threshold. So I think we can still increase capacity with our existing plants by being innovative, by leveraging our subcontractors, adding shifts etc. So we will be active in terms of adding new capacity," Bhandari said.
"We are also planning to build plants in multiple product lines investing quite a bit on newer technology whether it be digital, newer capabilities, R&D all of it. So it is not just smattering of companies, I think the larger sector overall is gearing up to hit new levels," he added.
First Published: Apr 28, 2022 7:32 PM IST
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